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25Dec 2015

The Geek's Reading List: Dec 25

Posted By: Brian Piccioni

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The Geek's Reading List is a weekly publication written by Valitas advisor, Brian Piccioni. Brian has been part of the technology industry for a third of a century now. He has been a sell-side research analyst for the past 20 years, where he was ranked the #1 tech analyst in Canada for six consecutive years, named one of the best tech analysts in the world, and won a number of awards for stock-picking and estimating. The Geek's Reading List looks at recent developments in the technology sector by discussing articles that Brian compiled over the week. In his own words, the discussions are usually provocative, new, and counter-consensus. The sorts of things not being written anywhere else.

1) Giving Credence: Why is So Much Reported Science Wrong, and What Can Fix That?

This takes a look at science reporting, but the problems go much deeper than illiterate reporters who don’t even know how to do a Google search on a topic. A big part of the problem is the shift towards a “publish or perish” business model for academia whereby volume counts for more than quality. There is virtually no incentive for scientists to attempt to verify if experimental results are replicable and good reasons not to even try since a different result may never be published and may result in conflict with peers. Bizarrely, what has become important is not whether a result can be replicated but who the co-authors are and how popular the paper was. If and when science cleans up its act, the media might follow.

“Perhaps the most notable hit to science, however, was a recent large-scale attempt to replicate 100 published psychology studies, fewer than half of which could actually be re-created. In fact, just 39 percent. No one is suggesting that the other 61 studies, or even a small percentage of them, were falsified. It’s just that, in the words of the study itself (also published in Science), “Scientific claims should not gain credence because of the status or authority of their originator but by the replicability of their supporting evidence. Even research of exemplary quality may have irreproducible empirical findings because of random or systematic error.””

2) Juniper firewall fiasco is a major blow-up for government’s backdoor rhetoric

This is what happens when you go around installing backdoors in things. Not so much because they are made public (most are not) but destroys trust in the equipment. Since NSA itself couldn’t stop a lowly contractor (Snowden) from accessing information this backdoor doubtless provided the Chinese, Russians, etc., with all kinds of useful information. Even if they didn’t know about it through their spies within NSA they probably were able to exploit it themselves. Besides being bad for business this actually opened up US secrets, which are probably more valuable than Chinese secrets. Well done!

“In the case of Juniper, it really is that bad. The networking equipment maker, with thousands of enterprise customers, said last week it had found “unauthorized” code that effectively allowed two backdoors to exist for as long as three years. Nobody disputes that this was a backdoor. Juniper said it had no evidence to suggest the backdoor had been used, but also warned there was “no way to detect” if it had been. The NSA was blamed for creating weakened cryptography that Juniper went on to modify — and badly. Exactly how the other backdoor got there remains a big question. In any case, companies who were running affected versions of Juniper’s firewalls were likely also targets of the suspected nation state attacker.”

3) Apple’s Tim Cook defends encryption. When will other tech CEOs do so?

Cook is almost the only guy in tech who is handling the whole encryption controversy correctly. Lucky for him, none of the Snowden documents proved Apple was collaborating with NSA as virtually all other large US tech companies were. That does not mean Apple was not, in fact, collaborating with NSA, but it does allow him to engage in vocal theater promoting the myth of Apple security. Needless to say, Apple’s OS is a closed, proprietary system, so you’ll just have to take his word for it that Apple is somehow the only large US tech company whose security has not been compromised. If you believe that, I have some swampland in Florida to sell you.

“It seems everywhere he goes these days, Apple CEO Tim Cook is out there forcefully and publicly defending his company’s decision to provide iPhone users with end-to-end text messaging and FaceTime encryption to protect against the constant threat of criminal hackers and foreign governments. The question is: when will other tech company leaders follow his lead? If we’re going to avoid having a horrible law banning encryption passed in the next year, more of the tech company giants’ high-profile representatives – the Mark Zuckerbergs, Marissa Mayers and Eric Schmidts – need to use their platforms as the world’s most well-known technology chiefs to make crystal clear how important encryption is to users everywhere.”

I am sort of baffled at the behaviour of politicians, law enforcement, and some executives on the subject of encryption. Realistically you should assume all your systems have been compromised, most likely by the NSA, and if they want your corporate or personal secrets, they’ll get them. All Chen is doing is advertising to all and sundry that he’s happy to open your data to whomever wants it, provided they can give him a legal segue. Imagine how pleased you’d be if you were promoting democratic change in Saudi Arabia or secularism in Pakistan.

“BlackBerry CEO John Chen entered the red-hot encryption debate on Thursday, writing a blog post explaining his company’s nuanced stance on whether governments or private companies should have a way to unscramble private communications to help catch criminals or terrorists. Traditionally, one of BlackBerry’s primary selling points is that its services, such as BBM messenger and Good Technology, offer “enterprise-grade encryption.” Chen advocates for a “proper balance” between its privacy conscious consumers and governments who want to access BlackBerry’s data for law enforcement purposes. Chen’s post largely echoes a statement BlackBerry provided to Fortune last month.”

I recall seeing propaganda (ads would be too charitable a term) for this service a few months ago. Basically Facebook was pretending to offer free access to the Internet in parts of the developing world but it was really offering free access to Facebook and small parts of Facebook. The propaganda characterized this as a charitable move but it was all business since Facebook is in the business of selling its customer data and it needed more customers. I don’t see anything wrong with that other than the stark hypocrisy of exploiting people in the developing world while portraying the move as humanitarianism. Ultimately, what the developing world needs, besides clean water, plumbing, electricity, etc., is not Facebook but development.

“Telecom Regulatory Authority of India (TRAI) has asked Reliance Communications to stop the Free Basics service of Facebook, at least for some time. “We have asked them (Reliance Communications) to stop it and they have given us a compliance report that it has been stopped,” a senior government official told TOI. Reliance Communications is Facebook’s sole telecom partner in India to offer a set of basic internet services free to its subscribers. The service is called Free Basics. Earlier known as internet.org, Free Basics has been criticised by several experts as being against the spirit of net neutrality.”

It may be that Microsoft will be more successful than Google in large enterprises but I figure there is a reasonable chance both companies will grow as cloud penetration grows (see item 7) and both will also take most of the market away from regional and even national cloud service providers who will be unable to offer the development infrastructure to deploy Platform as a Service type offerings, let alone to offer the equivalent of Office 360 or Google for Work.

“As Google and Microsoft battle for enterprise cloud customers, each company’s natural strengths (and weaknesses) become more apparent. Microsoft, for example, is winning over large enterprises that already have massive workforces on Office 365. Google for Work, meanwhile, continues to be popular among small-to-midsize businesses (SMBs), particularly organizations that don’t have dedicated IT staffs and aren’t burdened by legacy technologies that require ongoing support. The pendulum started to slowly swing back in Microsoft’s favor after it released Office 365 in 2013 and finally embraced the cloud, according to TJ Keitt, a senior analyst with Forrester Research. It is difficult to accurately compare the two companies’ user numbers because neither Microsoft nor Google provide details on user bases, or the sizes of the companies they serve, but Keitt suggests Microsoft is on the winning end of the recent shift.”

This item suggests that the success Amazon, Microsoft, and Google, have had penetrating the enterprise market for cloud services is still in its early stages. Businesses tend to be fad driven and the transition to the cloud is something that has to be top of mind for many senior executives. Although I continue to have serious questions as to whether or not the cloud is a prudent choice, it seems pretty clear that’s the direction things are heading.

“”The most surprising finding from the survey was that while we know there’s still a long way to go for companies to fully and strategically embrace the cloud, the results showed most organizations are a lot further off than even we realized,” Kevin Roberts, director of platform technology at FinancialForce, told eWEEK. “If you add up the numbers in the survey, over 85 percent of companies are using two or more cloud applications to run their business—most use even more.” The research also indicated that, unchecked by IT, many business units buy cloud solutions without much thought as to how multiple systems will share data.”

I am quite skeptical about “big data” for a number of reasons. First, the larger the data set the greater the likelihood of spurious correlations, complex distributions (not everything works by Bell Curves) and so on. I can see why tech companies are pushing the idea and some of the examples seem impressive. Of course, failures are never mentioned, nor do we see cost benefit analysis for the average big data application – just vague stories of times when it worked out.

“IBM estimates that each day, 2.5 quintillion bytes of data are created or replicated. That’s the equivalent of a million hard drives filling up with data every hour. The current volume of data created is substantial: it is so much that 90% of the world’s data has been created in the last two years. However, the amount of information today pales in comparison to what our future holds, as the rate at which data is created is accelerating exponentially. It’s for this reason that The Economist estimates that there will be roughly 7x more data in 2020 than there was in 2014.”

This novel approach uses the information provided by reflection of polarized light to greatly enhance 3D imaging. Unfortunately the article does not discuss the time or processing power required to produce the image, nor does it discuss limitations cause by materials which randomly polarize light. Nonetheless it is a pretty impressive result.

“The researchers’ experimental setup consisted of a Microsoft Kinect — which gauges depth using reflection time — with an ordinary polarizing photographic lens placed in front of its camera. In each experiment, the researchers took three photos of an object, rotating the polarizing filter each time, and their algorithms compared the light intensities of the resulting images. On its own, at a distance of several meters, the Kinect can resolve physical features as small as a centimeter or so across. But with the addition of the polarization information, the researchers’ system could resolve features in the range of tens of micrometers, or one-thousandth the size. For comparison, the researchers also imaged several of their test objects with a high-precision laser scanner, which requires that the object be inserted into the scanner bed. Polarized 3D still offered the higher resolution.”

X-ray is a bit of an overstatement. Basically, this device seems to be a sophisticated radar system which can show images of people, provided you know they are images of people when you look at them. The technology is probably quite interesting but we’ll have to wait to see if it has any practical application.

“It’s one superpower that’s been envied throughout the ages, but a new spin-off company of MIT researchers might be bringing X-ray vision devices to the consumer market in just two years. As PC World reports via IDG New Service, the new X-ray devices, called “Emerald,” might be available as soon as 2017 and cost only $250 to $300. Put that on your must-have gift list for 2017. MIT’s Computer Science and Artificial Intelligence Lab, or CSAIL, has been working on the technology for more than two years, but are now spinning off an entity to focus on making the X-ray vision gadgets market ready.”

There are lots of things going on in the cable TV business. Alternatives such as Netflix mean that, instead of watching a reality show on a “science” channel you can actually watch “The Inexplicable Universe with Neil deGrasse Tyson” and actually get some science. Furthermore, cable rates continue to climb despite a shift in consumer preferences (see items 12 and 13). I find the figures cited below quite surprising as they suggest an inflection point. Regardless of the health of the business of speciality channels, demand for content will probably remain strong it is just the delivery channel which is changing.

“All told, the average rate of decline for the bigger cable outlets was 12%. Some of the most severe drop-offs were weathered by sibling networks History (-27% to 416,000) and A&E (-26% to 350,000); Viacom’s MTV (-23% to 301,000) and Comedy Central (-22% to 338,000); Discovery Communications’ TLC (-20% to 316,000) and NBC Universal’s USA Network (-20% to 648,000) and Bravo (-17% to 364,000). Also taking a hit were eighth-place FX, which fell 16% in live-same-day to an average draw of 530,000 members of the so-called dollar demo, and Turner Broadcasting’s TNT, down 13% to 573,000.”

This is part of the issue that is resulting in cord cutting: consumers now have a choice in terms of what they watch and when they watch it, and rather than adjusting pricing to entice people to stay, cable providers (including those in Canada) are raising rates. Of course, cable providers are typically also broadband providers so they win either way, especially as broadband rates are defying reality and increasing as well, at least in North America. Even cable modem rental prices are going up, while the cost of every other piece of network gear is dropping. Broadband delivery is an industry poised for disruption if ever the regulators decide to regulate with the best interests of consumers in mind.

“DirecTV and AT&T’s Uverse, which are now a part of the same company, announced last week that their rates will go up starting Jan. 28. The increases will vary for customers, but different base packages, channel bundles and premium channels will see increases ranging from $2 to $8 per month. New year rate hikes for DirecTV have become an almost annual occurrence, with the company raising fees by as much as 6 percent last January. Dish Network customers will also see a rate hike next year. The company is increasing the pricing on its bundles from between $2 and $8 per month starting Jan. 14. Time Warner Cable subscribers could see jumps of $10 a month or more early in 2016.”

This is another look at the issue of home broadband penetration and “cord cutting”. Although it seems likely discontinuing cable TV service due to superior and less expensive alternatives is a problem for the industry, economic factors are probably important drivers of this data. For example, the survey notes 43% of those without broadband do not have the service due to cost. The decline in broadband penetration should be an issue for governments as the technology is an important factor in the development of a modern economy.

“Three notable changes relating to digital access and digital divides are occurring in the realm of personal connectivity, according to new findings from Pew Research Center surveys. First, home broadband adoption seems to have plateaued. It now stands at 67% of Americans, down slightly from 70% in 2013, a small but statistically significant difference which could represent a blip or might be a more prolonged reality. This change moves home broadband adoption to where it was in 2012.”

14) With spectrum auction looming, a community college questions the value of its public TV station

I was unaware of this most recent move to free up spectrum on the US. Given that many smaller stations can find a broad audience using “Over The Top” Internet broadcasting, I suspect many will jump at the opportunity to sell their spectrum and go OTT only.

“The unprecedented auction looks to buy up as much television spectrum across the country and repackage it for wireless carriers like Verizon and AT&T as the general public relies more on mobile devices as opposed to old fashioned over-the-air TV waves. As a result, industry experts have estimated as many as 500 TV stations across the country could go off the air if their owners decide to sell. “It’s a total game-changer for the industry,” said Harry Jessell, editor of TVNewsCheck.com, a trade publication covering the broadcasting industry. “Every broadcaster in the nation right now, commercial and public, is trying to decide if it makes more sense financially to continue operating or to sell and go off the air.””

Genetic engineering is moving at a brisk pace, despite being blocked in agriculture, where it might provide the greatest benefit. I figure it is matter of time before the regulatory environment is restricted to facilitate the introduction of such horrors are disease resistant orange trees or strawberries which don’t spoil as quickly. In the meantime a whole industry is developing around producing the tools to manufacture these and other GM organisms, including those in less regulated areas.

“Emily Leproust, CEO and cofounder of the buzzy biotech startup Twist Bioscience, is an industrialist on the nanoscale. “I remind everyone at Twist, we are a manufacturing company,” she says. “We manufacture DNA.” Twist is part of the young industry of synthetic biology, in which living organisms are the product and a biology lab is the factory floor. By manufacturing strands of DNA—assembling the genetic code of life from its basic components—scientists are creating organisms the likes of which the world has never seen. And these new life forms can be decidedly useful: Biologists have produced yeast cells that excrete pharmaceuticals and algae that brew jet fuel.”

Something tells me the journalist got a bit carried away on this story. An automotive mesh network is primarily about Vehicle to Vehicle (V2V) communication for advanced safety systems and eventually self-driving cars, not about putting your local Internet service provider out of business.

“The traditional fixed line and mobile carrier’s days could be numbered if the roll out of a new ‘Global Mesh’ project by the automotive industry goes to plan. The project could see the delivery of about 100 million wireless access points per annum in new cars across the planet. Nathan Stewart from IT and Cloud solutions provider Total Group, who is technical lead for the initiative set for launch in 2021, told Comms Dealer: “Within two years of launch the automotive industry will have more coverage and bandwidth than the existing copper, fibre and mobile networks combined. They will overnight become a super carrier.” It’s expected that by 2022 the automotive ‘Global Mesh’ will provide 10Gb wireless bandwidth across the globe anywhere within a few kilometres of a modern car.”

17) Marc Andreessen: ‘In 20 years, every physical item will have a chip implanted in it’

I remember the hype and hysteria about RFID about 15 years ago. You might recall the advertisements about how we would just walk out of the store and the magic of RFID meant all our purchases would be automatically tallied and charged to our credit card. That was 15 years ago. Now people claim the same thing is going to happen but they call it Internet of Things (IoT) instead of RFID. The fact of the matter is that, while there are plenty of interesting applications for IoT, the technology is being vastly overhyped. I can’t fault a guy for talking up his book though.

“The hype around the Internet of Things has been rising steadily over the past five years. In tech analyst Gartner’s Hype Cycle for Emerging Technologies report in 2015, the IoT is at the peak of “inflated expectations”, particularly for areas like the smart home, which involve controlling your lights, thermostat or TV using your mobile phone. But the era of sensors has only just dawned, according to renowned technology investor and internet pioneer Marc Andreessen. In 10 years, he predicts mobile phones themselves could disappear.”

“Unicorn” is newspeak for a hugely overvalued private company which burns through shareholder money like there is no tomorrow. Examples include Uber and Theranos, but there are many. One way Unicorns mange to entice new employees is through the issue of stock or options. Unfortunately, most employees lack an understanding of the capital markets, let alone expected value calculations, and accept well below market rates plus a dream which will never be fulfilled. Not only that but the stock grants are taxed meaning that when the Unicorn is sold at a fraction of the value they expected, they are out actual real money for the privilege of having been paid less.

“In an investor document about the sale that was distributed to shareholders, employees discovered their Good stock was valued at 44 cents a share, down from $4.32 a year earlier. In contrast, preferred stock owned by Good’s venture capitalists was worth almost seven times as much, more than $3 a share. The paperwork also showed that Good’s board had turned down an $825 million cash offer just six months earlier, in March. For some employees, it meant that their shares were practically worthless. Even worse, they had paid taxes on the stock based on the higher value.”

I admit I was surprised they managed to do it, but they solved the engineering problem of landing a first stage of a rocket. Several things will determine whether or not this is an important development. If a reused rocket ever blows up, there are going to be lots of questions as to whether it was the fact it was reused that caused the loss. Furthermore, it is not clear that lower launch costs will have a dramatic impact on the number of launches. Either way, the fact one company has solved an engineering problem doesn’t mean other companies won’t be able to do the same.

“SpaceX’s last flight in June ended with its Falcon 9 rocket breaking up shortly after launch. When the rocket is meant to be recoverable after launch, you can see why this would be an… issue. CEO Elon Musk tried to improve his odds, this time around, pushing back the launch of its upgraded Falcon 9 rocket to Monday night. Better weather this evening offered a 10 percent better chance of the rocket booster landing on solid ground in a recoverable state, and for those that watched the stream, it looked like a surprisingly stable landing: a bright flare of light followed by the appearance of a fully vertical rocket — this was the stage one landing.”

This is sort of a redux of what happened when Voice Over IP (VOIP) was introduced about 20 years ago, disrupting the carefully managed “long distance” cash cow of telephone companies. There are all kinds of businesses which are protected by rules and regulations those businesses helped create and Internet technologies can offer workarounds to those regulations or even allow citizens to violate obsolete laws. You need laws but it is not clear if you need laws to stifle competition and guarantee returns on certain types of businesses. One way or the other, technology usually wins.

“WhatsApp is the most popular app in Brazil, used by about 100 million people. The Brazilian telecoms hate the service because it entices people away from more expensive text messaging services, and they have been lobbying for months to convince the government that it’s unregulated and illegal. A judge finally agreed. In Brazil’s case, WhatsApp was blocked for allegedly failing to respond to a court order. Another judge reversed the ban 12 hours later, but there is a pattern forming here. In Egypt, Vodafone has complained about the legality of WhatsApp’s free voice-calls, while India’s telecoms firms have been lobbying hard to curb messaging apps such as WhatsApp and Viber. Earlier this year, the United Arab Emirates blocked WhatsApp’s free voice call feature.”